Correlation Between Salesforce and Beijing Enterprises

Can any of the company-specific risk be diversified away by investing in both Salesforce and Beijing Enterprises at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Salesforce and Beijing Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Salesforce and Beijing Enterprises Water, you can compare the effects of market volatilities on Salesforce and Beijing Enterprises and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Salesforce with a short position of Beijing Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Beijing Enterprises.

Diversification Opportunities for Salesforce and Beijing Enterprises

-0.36

Correlation Coefficient

Salesforce  Beijing Enterprises

Very good diversification

The 3 months correlation between Salesforce and Beijing is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Beijing Enterprises Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Enterprises Water and Salesforce is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Salesforce are associated (or correlated) with Beijing Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Enterprises Water has no effect on the direction of Salesforce i.e., Salesforce and Beijing Enterprises go up and down completely randomly.

Pair Corralation between Salesforce and Beijing Enterprises

Considering the 90-day investment horizon Salesforce is expected to generate 11.75 times less return on investment than Beijing Enterprises. But when comparing it to its historical volatility, Salesforce is 3.66 times less risky than Beijing Enterprises. It trades about 0.07 of its potential returns per unit of risk. Beijing Enterprises Water is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Beijing Enterprises Water on February 13, 2024 and sell it today you would earn a total of  4.00  from holding Beijing Enterprises Water or generate 17.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Salesforce  vs.  Beijing Enterprises Water

Salesforce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Beijing Enterprises Water

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enterprises Water are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Beijing Enterprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Salesforce and Beijing Enterprises

The main advantage of trading using opposite Salesforce and Beijing Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce position performs unexpectedly, Beijing Enterprises can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Beijing Enterprises will offset losses from the drop in Beijing Enterprises' long position.

The idea behind Salesforce and Beijing Enterprises Water pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.